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The following are this week’s summaries of civil decisions released by the Court of Appeal. The topics covered include bankruptcy, the law of guarantee, the principles of contract interpretation, relief from forfeiture, civil procedure (service of foreign defendants) and family law.

Of particular interest are the three decisions concerning the bankruptcy of Montor Business Corporation and Summit Glen Group of Companies Inc., which dealt with a number of issues concerning the management of assets and payments during bankruptcy.

A mini-trial was held as directed by a consent order of the Superior Court of Justice to determine a fact-driven question.

The trial judge did not rule on the issue of whether the respondent’s action against Kamran Samimi was stayed under s. 69(1) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “BIA”).

Issues:

(1) Did the trial judge err in not deciding the issue regarding s. 69(1) of the BIA before holding the mini-trial thereby rendering the trial moot and unnecessary?

(2) Did the conduct of the mini-trial occasion any procedural unfairness?

(3) Did the trial judge err in his costs award?

Holding:

The main appeal is dismissed. Leave to appeal costs is granted and costs varied. Respondent is entitled to costs for this appeal.

Reasoning:

(1) No. The BIA automatic stay applied only to the action against one of the appellants (Kamran Samimi). Further, the answer to the question posed, and the trial judge’s factual findings supporting that answer, could ground more than one cause of action against the appellants, as well as Kamran Samimi. Therefore the mini-trial was not moot or unnecessary.

(2) No. The appellants were well aware of the contents of the respondent’s pleading and therefore it was foreseeable that factual findings could ground the stand-alone claims asserted by the respondent against the appellants. The trial judge also limited his decision to factual findings responsive to the question the parties had agreed upon. Finally, there is no evidence that the appellants sought an adjournment of the proceeding to appeal the trial judge’s ruling which indicated his intention to determine the question of the BIA stay after the mini-trial.

(3) Yes. The trial judge failed to account for the appellants’ success in defeating the respondent’s motion to continue his action against Kamran. The $141,000 costs award was reduced by $7,500.

Farber, in its capacity as Trustee of Annopol (in bankruptcy), challenges the trial judge’s refusal to set aside transactions arising from a settlement between Goldfinger, Kimel and some of Kimel’s companies. In particular, Farber seeks to set aside certain transactions arising from a settlement: (1) payments totalling $2.5 million to Goldfinger from Annopol (the “Payments”); and (2) mortgages granted to Goldfinger by SG Brantford and Summit Glen Bridge Street Inc. (“SG Bridge”) over their respective properties, and Annopol’s subordination of mortgage security in favour of Goldfinger (the “Brantford/Bridge 2008 Transactions”).

Goldfinger cross-appeals on the basis that the trial judge erred in setting aside a $471,000 payment in his favour from SG Brantford. The trial judge found that the payment was contrary to s. 2 of the Fraudulent Conveyances Act (“FCA”) and oppressive under s. 248 of the Ontario Business Corporations Act (“OBCA”).

Issues:

(1) Did the trial judge err in refusing to set aside transactions arising from the settlement between Goldfinger and Kimel (and Kimel’s companies)?

(2) Did the trial judge err in setting aside a $471,000 payment in his favour from SG Brantford?

Holding: Appeals dismissed.

Reasoning:

(1) No. Farber challenged the $2.5 million Payments from Annopol to Goldfinger, arguing the Payments were: (a) transfers at undervalue contrary to s. 96 of the Bankruptcy and Insolvency Act (“BIA”); (b) unjust preferences under s. 4 of the Assignments and Preferences Act (“APA”); (c) fraudulent conveyances under s. 2 of the FCA; (d) oppressive under s. 248 of the OBCA; and (e) unjust enrichment.

The court went through each of these challenges in detail and dismissed them all:

(a) The court held that ‘transfers at undervalue’ require weighing the adequacy of consideration, an exercise in judgment rather than precision. Case law shows that forbearance from suit and a settlement agreement may constitute adequate consideration depending on the facts. The court found that the submitted evidence supported the finding that Goldfinger was genuinely threatening legal action, and therefore the trial judge did not err in concluding Goldfinger’s forbearance constituted consideration.

(b) In order for this challenge to succeed, Farber needed to show that Annopal intended to defeat, hinder, or prejudice a creditor (the other elements of the test had already been met). No evidence was tendered from any creditor and there was no evidence that established that Annopol paid creditor funds to Goldfinger.

(c) The court, having already addressed the issue of intent, stated that there was no need to address the issue of Goldfinger’s knowledge. The trial judge was correct in dismissing Farber’s claim under the FCA.

(d) The granting of an oppression remedy is a discretionary decision that affords the court broad powers to rectify corporate malfeasance. The court found that the trial judge’s decision reflected an exercise in discretion and is entitled to deference in this regard.

(e) Applying the principles of unjust enrichment to the issues on appeal, the first two requirements were clearly met. The real issue turns on the third element: was there a juristic reason for the enrichment? The settlement provided a rationale for the Payments and hence amounted to a juristic reason. In addition, Goldfinger’s advance of $2.9 million to Annopol amounted to a juristic reason.

(2) No. Goldfinger has not identified any palpable and overriding error that would serve to displace the trial judge’s findings related to the interpretation of the evidence as a whole.

On December 1, 2008, Summit Glen Waterloo/2000 Developments Inc. (“SG Waterloo”) was placed in receivership, and on June 28, 2010, it was adjudged bankrupt. A. Farber & Partners (“Farber”) was appointed as Trustee in Bankruptcy of SG Waterloo. On November 22, 2010, Farber sold property owned by SG Waterloo located at 105 University Avenue, Waterloo, and the proceeds were paid into court pending the disposition of this litigation. This is the second of three companion appeals, the other appeals bearing file numbers C57879 and C58356.

In 2001 SG Waterloo granted two charges over 105 University Avenue to the Community Trust Company (“CTC”). The first charge secured $50,000 that SG Waterloo borrowed from CTC. The second charge for $500,000, secured guarantees provided by SG Waterloo in support of two promissory notes in favour of CTC – one from Goldfinger and one from Kimel. SG Waterloo, Goldfinger, and Kimel defaulted in payment on the CTC loans.

CTC commenced an action against Goldfinger and Kimel on the personal loans, and a separate action against SG Waterloo. CTC obtained default judgement against SG Waterloo and Kimel, but not against Goldfinger, who defended and asserted a counterclaim against CTC. Goldfinger and Kimel also cross-claimed against each other. On December 16, 2009, Goldfinger, Kimel, Mahvash (Kimel’s then-wife) and a number of Kimel’s companies, including SG Waterloo, entered into a settlement agreement (“2009 Settlement”). As part of the settlement agreement, the parties agreed to enter into a mutual release (the “Release”) of any future claims that may arise as a result of CTC’s action against them. Consideration was provided.

After entering into the 2009 Settlement, Goldfinger negotiated an additional settlement of CTC’s action against him. On July 27, 2010 Goldfinger incorporated 1830994 Ontario Ltd. (“183”). On August 4, 2010, CTC assigned its two charges on SG Waterloo’s property and the default judgement to 183 for valuable consideration. In summary, Goldfinger incorporated 183 and had 183 purchase the assignments from CTC. As a result, 183 became a creditor of Goldfinger, and of SG Waterloo and Kimel as well. Farber objected. 183 and Goldfinger then brought a motion seeking to have 183’s claim against SG Waterloo valued under s. 135 of the Bankruptcy and Insolvency Act, R.S.C 1985, c. B. 3, and to require that SG Waterloo’s estate satisfy those claims. The trial judge decided that the claims should be addressed in a hybrid trial together with the subject of Court File Nos. C58356 and CC57879. Farber is now appealing the trial judge’s allowance of the claims made by 183. It appeals in its capacity as Trustee in bankruptcy of Annopol Holdings Limited, Montor Business Corporation and Summit Glen Group of Companies Inc. Its primary submission is that 183’s claims were caught by the terms of a full and final mutual release that were reached in the 2009 Settlement.

Issues:

(1) Did the trial judge err in concluding that the Release did not extinguish 183’s claims?

Holding:

Appeal allowed.

Reasoning:

(1) Yes, the trial judge erred in concluding that the Release did not extinguish 183’s claims because he failed to consider the entirety of the contract when interpreting its proper meaning and scope.

Firstly, the standard of review must be considered. In Sattva Capital Corp. v Creston Moly Corp.(“Sattva”), at para. 50, the Supreme Court of Canada held that contractual interpretation involves questions of mixed fact and law, and as such should be reviewed for palpable and overriding error. However, the Supreme Court recognized that it may be possible to identify an extricable question of law, which would be reviewed on a correctness standard: Sattva at para. 53. Extricable questions of law include legal errors involving “the application of an incorrect principle, the failure to consider a required element of a legal test, or the failure to consider a relevant factor”: Sattva, at paragraph 53.

Here, the language and wording of the Release had to be reviewed, construed, and assigned meaning. The language of the Release had to be considered as a whole: Deslaurier Custom Cabinets Inc. v 1728106 Ontario Inc., at paras. 31, 54 and 59. Such an exercise of review is not evident from the reasons advanced by the trial judge for rejecting Farber’s position. This was an error. When considered as a whole, the Release applies to companies controlled by Goldfinger, including 183, and to the subject matter of 183’s claims. Based on considering the entire Release as a whole, it is clear that the definition in the Release that Goldfinger is relying on is the result of a drafting error. Although the “Goldfinger” definition is ambiguous, the definition of “Kimel Parties” in the Release provides a guide to interpretation of the definition of “Goldfinger”, and makes both grammatical and commercial sense. As such, the definition, in the context of the release read as a whole, should state: “successors, corporations under his control, and on behalf of any party or parties who claim a right or interest through him” (emphasis added). It would be bizarre if a person could circumvent the ambit of a release simply by establishing a nominee company.

Second, turning to the subject matter of the Release, the parties to the 2009 Settlement (and such parties should be read to include 183) gave up their claims to proceeds generated by SG Waterloo. Goldfinger described the 2009 Settlement as being “comprehensive” and entered it to minimize significant legal costs and losses. He stated he made a compromise as he was entitled to no further repayment of the debt that was owed to him. He also stated that he lost his desire to litigate as a result of family circumstances. These surrounding circumstances lend support to the conclusion that the 2009 Settlement, including the mutual release, was designed to result in finality and to release any future claim Goldfinger, and by extension183, had against SG Waterloo.

In summary, the release included 183, and SG Waterloo was a beneficiary of the Release. Under the 2009 Agreement, Goldfinger had both released SG Waterloo and given up any claim to the proceeds from the sale of 105 University Avenue. It is not now open to him, through the guise of 183 to circumvent those commitments.

On behalf of Annapol, the trial judge found that SG Waterloo owed $420,000 in unsecured debt due to a proof of claim filed on behalf of Annapol for that amount. Farber argues that that this amount should be $457,600 in light of the trial judge’s finding of fact that this was the amount of unsecured debt owed. In addition Farber submits that the interest payments ordered should begin from the date of each advance and not the date of the last advance as ruled by the trial judge.

On behalf of SG Group, SG Waterloo owned a building for which SG Group made a number of payments to third parties on its behalf. Farber, on behalf of SG Group, claims that SG Waterloo was unjustly enriched. The amount for which is disputed on appeal, as Farber argues that the standard of certainty, used by the trial judge with respect to evidence of payment, is too high of a burden. In addition, the trial judge ruled that because the claim was based on unjust enrichment and not a loan agreement, s.3 of the Interest Act, RSC 1985, did not apply. Interest was therefore awarded in accordance with the prejudgment interest provisions of the Courts of Justice Act, RSO 1990, c. C.43. The trial judge ordered that interest be paid from the date of bankruptcy, which is not disputed by Farber.

Issues:

Annapol

(1) Should the amount of unsecured debt owed be increased to $457,600?

(2) Should the interest payments accrue as of the date of each advance?

SG Group

Did the trial judge err by requiring that Farber establish with certainty the sum paid to a third party?

Should interest be calculated based on the s.3 of the Interest Act?

Holding: Appeal Allowed, in part. Cross-appeal dismissed.

Reasoning:

Annapol

(1) The record supports the position that the correct amount is $457,600, this amount is not seriously objected to and therefore this ground of appeal is allowed.

(2) As per Garland v Consumers’ Gas Co., [1998] 3 SCR 112, interest compensates for “the use or retention by one person of a sum of money…which accrues day by day,” as such, absent evidence to the contrary, interest should accrue from the date of each individual advance.

SG Group

(1) The trial judge applied the correct test from South Beach Homes Ltd. (Re), 2010 SKQB 182, Sask R, 82 [not recorded in these reasons]. The test is not a test of certainty, and the court recognized that.

(2) There is no reason to disturb the trial judge’s finding in this case. Farber proceeded by way of unjust enrichment and the Interest Act was therefore not applicable.

The appellant commenced an action seeking $500,000 for jewelry it had consigned to the respondent, 3282212 Canada Inc., but which had been stolen in 2008. The motion judged dismissed the appellant’s action by way of summary judgment on the ground that the claim was statute-barred. The appellant submits that the motion judge committed two errors in reaching his conclusion.

Issues:

Did the motion judge err in failing to find that an email sent by one of the respondents, Mr. Durani, was an acknowledgement of liability within the meaning of s.13(1) of the Limitations Act, 2002?

Did the motion judge err in failing to find that the doctrine of promissory estoppel prevented the respondents from relying on the limitation period?

Holding: Appeal dismissed.

Reasoning:

The language of the statute sets out the applicable test, namely, that s. 13(1) is engaged when a person acknowledges liability in respect of a claim for payment of a liquidated amount. Section 13(1) requires a clear and unequivocal acknowledgement of the debt claimed. The Court found that, at most, Mr. Durrani’s email proposed negotiating a settlement plan, without acknowledging that any amount remained owing. Therefore, the email was not an acknowledgement.

The record supports the motion judge’s finding that the words or conduct of the defendants did not contain a promise not to rely upon the limitation period.

Facts: This is an appeal regarding an employer’s duty to accommodate a disabled employee, and the remedy of reinstating that employee to her position of employment under the Ontario Human Rights Code, R.S.O. 1990, c. H.19. The Tribunal found that the School Board had discriminated against Ms. Fair by failing to accommodate her disability for generalized anxiety disorder, depression, and post-traumatic stress disorder. The Tribunal reinstated Ms. Fair’s employment with the School Board, and the Divisional Court dismissed the School Board’s application for judicial review.

Issues: Did the Divisional Court err in ordering that Ms. Fair be reinstated to her employment with the Board after 14 years of absence?

Holding: Appeal dismissed

Reasoning: No. Under section 5 of the Human Rights Code, every person has the right to equal treatment in employment without discrimination or harassment due to certain specified attributes, such as disability. Failing to accommodate a disability, as described under Section 17 of the Human Rights Code, is prohibited if the disabled person’s needs could be accommodated without undue hardship on the employer.

In this case, there was no evidence that the School Board lacked the financial resources to fill the position of Area Supervisor, or that doing so would have caused undue hardship. Importantly, the Court highlights that an employer has no obligation to place a disabled employee into a position for which he or she is not qualified. However, in order to fulfil its duty to accommodate, an employer may be required to place a disabled employee into a position for which they are qualified but not necessarily the most qualified. The Court of Appeal agreed with the Divisional Court that the School Board “never had any real intention to accommodate [Ms. Fair].”

The Court also affirmed that the remedy of reinstatement was appropriate in this case and explained that ordering the remedy falls within the Tribunal’s discretion under s. 45.2(1) of the Human Rights Code. The Court agrees with the Tribunal that “the goal of human rights legislation, which is remedial in nature, is to put the applicant in the position that he or she would have been in had the discrimination not taken place”, and as such, reinstatement is sometimes the only appropriate remedy.

Claudio Posocco is the President of Sedona Lifestyles (Dixie) Inc. (“Sedona”) which owned a development property in Mississauga. Sedona had granted mortgages against this property to the respondents. The first mortgage was granted to the Battistas (the “Battista Mortgage”). The Battistas Mortgage was extended several times. To obtain one of the extensions, Posocco provided a personal guarantee to the Battistas dated December 22, 2011, guaranteeing payment by Sedona of all sums of money loaned by the Battistas to Sedona (the “Guarantee”). Sedona failed to pay the Battista Mortgage when it became due The Battistas commenced an action against Sedona and obtained a consent judgment ordering the sale of the property and granting judgment against Sedona in the amount of $758,540.32 (the “Sedona Judgment”). They also obtained an unopposed judgment on February 21, 2014, on the Guarantee against Posocco in the amount of $794,471.41 (the “Posocco Judgment”).

By then Sedona had also granted a second mortgage to Casimiro Holdings Inc. and a third mortgage to Raimondo Holdings Inc. After obtaining judgment, the Battistas assigned their beneficial interest in the Battista Mortgage, the Guarantee, the Posocco Judgment and the Sedona Judgment to Justam Holdings Limited, a company with the same principal as Casimiro. Justam gave notice of the assignment to Posocco. Raimondo transferred its third mortgage to Casimiro, so by that time, companies controlled by Mr. Casimiro held the three mortgages on the Sedona Property. After that, postponements of the Battista Mortgage to the second and third mortgages were registered on title. Next, Casimiro commence a foreclosure action and obtained a judgment on August 14, 2015 foreclosing the right, title and equity of redemption of Sedona and the Battistas in the property (the “Foreclosure Judgment”).

In this appeal, Posocco seeks to set aside the Posocco Judgment. He claims that the Guarantee granted to the Battistas is no longer enforceable because postponements of the Battista Mortgage to the second and third mortgages held by Casimiro on May 22, 2015 were done without his consent and materially altered his risk on the Guarantee. He also seeks to adduce fresh evidence about the Foreclosure Judgment which was not before the application judge. Posocco submits that the registration of the Foresclosure Judgment renders the Posocco Judgment and associated writs unenforceable because the Foreclosure Judgment had the effect of extinguishing the guaranteed obligation.

Issues:

(1) Is the standard of review of the interpretation of the Guarantee agreement “palpable and overriding error” unless extricable errors of law are evident (Sattva Capital Corp. v. Creston Moly Corp, 2014 SCC 53)?

(2) Did the application judge err in interpreting the Guarantee to allow the Battistas to postpone the Battista Mortgage to other security without Posocco’s consent and without terminating Posocco’s liability under the Guarantee?

(3)(a) Did the postponement cause Posocco to lose the guarantor’s right of subrogation under s. 2(1) of the Mercantile Law Amendment Act, R.S.O. 1990, c. M.10 ?

(3)(b) Would Posocco losing his right under s. 2(1) of the Mercantile Act terminate his obligations under the Guarantee?

(4) Can the Foreclosure Judgment be admitted as fresh evidence?

Holding:

Appeal dismissed in part.

Reasoning:

(1) Yes. The Guarantee is a non-standard form contract which is specific only to the legal obligations of the present parties. Therefore it is a question of mixed fact and law and attracts the Sattva standard.

(2) No. The issue of determining continuing liability of a guarantor requires determining the intention of the parties as demonstrated by the words of the guarantee.

The relevant provision of the agreement, s. 2(iii), stipulates that the guarantor agreed that the creditor “in its absolute discretion and without diminishing the liability of the Guarantor” may “give up, modify, vary, exchange, renew or abstain from, perfecting or taking advantage of…any security in whole or in part”. The terms “modify” and “vary” are broad terms of alteration however when read in the context of s. 2(iii) as a whole. The postponement of a mortgage involved the modification or variation of a mortgage, specifically the priority of the mortgage and therefore falls within the ambit of these terms.

Further, postponement of the priority of the mortgage is a lesser act than what s. 2(iii) already allows the creditor to do without diminishing the liability of the Guarantor. It does not make sense that this lesser act would diminish liability. The postponement of the mortgage changes Posocco’s risk, but under the plain language of s.2(iii) it is clear that he agreed the creditor could alter his risk. Further, the judgment following the default by the principal debtor was granted before the change in risk. Posocco’s liability was thus already crystallized and fixed by this judgment.

(3)(a) No. s. 2(1) of the Act only entitles a surety to an assignment of the security where he has actually paid the debt. Prosocco has not paid the debt.

(3)(b) No. Given that s. 2(iii) of the Guarantee permitted the creditor to “give up” or “discharge” the mortgage security without Posocco’s consent, the language of the Guarantee specifically contemplates that no security might remain at the time Posocco paid the debt.

(4) Yes. Based on the test established in Palmer v. The Queen, [1980] 1 S.C.R. 759, the elements of due diligence as well as relevance and credibility have been established. Further, had the Foreclosure Judgment been before the application judge, it could have affected the result. The appropriate course of action is to remit to the application judge for further hearing the issue of the effect of the Foreclosure Judgment on the enforceability of the Posocco Judgment and related writs.

The parties were married on August 9, 2002 and separated on February 7, 2011. The parties appeal and cross-appeal from the trial judgment of April 29, 2015, in which the trial judge granted the parties a divorce and dealt with equalization of property (dealing primarily with a motel they own, and their matrimonial home which was on the same property), spousal support, and various other claims, including costs.

Issues:

(1) Equalization: Did the trial judge err in deducting notional real estate fees from the value of the motel?

(2) Equalization: Did the trial judge err in his evaluation of the matrimonial home?

(3) Spousal Support: Did the trial judge err in calculating the spousal support on the basis of net rather than gross amounts and in reducing the support to make it tax neutral?

(4) Spousal Support: Did the trial judge err in awarding spousal support to the appellant?

(5) Other Claims: Did the trial judge err in dismissing the appellant’s claims for occupation rent from the respondent and for a portion of the carrying costs of the cottage where he resided after separation?

(6) Other Claims: Did the trial judge err in accepting the respondent’s evidence concerning the value of the respondent’s household goods?

(7) Costs: Did the trial judge err in concluding that neither parties conduct met the very high threshold for bad faith under r. 24 (8) of the Family Law rules, O. Reg. 114/99?

(8)Costs: Did the trial judge err in his costs award to the appellant?

Holding: Part of appellant’s appeal ( regarding the deduction of notional real estate fees) is granted, but the appeal and cross-appeal are otherwise dismissed. The parties shall absorb their own costs

Reasoning:

(1) Yes. The trial judge concluded that notional real estate fees of 5% of the date of separation value of the motel property should be deducted, but this was incorrect on the facts. In the present case, there was no clear and satisfactory evidence that the respondent was contemplating the possible sale of the motel property or her shares of the numbered company in the foreseeable future (evidence is to the contrary). Consequently, the figure deducted must be added back into the equalization calculation, owed to the appellant.

(2) No. The trial judge acknowledged the difficulty in assessing the value of this property because of its uniqueness as part of the motel property. His calculation of the matrimonial home was logical, fair and based on the portions of the expert’s report that he did accept.

(3) No. The trial judge correctly arrived at an average gross income figure for the purpose of calculating spousal support. It is clear that the trial judge considered gross as well as averaged figures in his estimate. The trial judge was also entitled to make the lump sum figure tax neutral because he had treated the amount awarded as overdue spousal support bearing interest from the date of separation, which in this case was fair and reasonable.

(4) No. The court found no error in the trial judge’s determination that the appellant was entitled to spousal support based on the evidence before him that the appellant worked at the motel at the respondent’s request and to the respondent’s benefit.

(5) No. The court agrees with the trial judge’s determination that the appellant was not entitled to those amounts. The appellant had abandoned any claims in relation to the business and he had no beneficial ownership in the motel or the matrimonial home. The circumstances did not warrant requiring the respondent to pay carrying costs of the appellant’s residence.

(6) No. The court finds no error in the trial judge’s rejection of the appellant’s estimate or the argument challenging the respondent’s credibility.

(7) No. While this was a high conflict case, there was no evidence of bad faith sufficient to invoke an entitlement by either party to recover full costs.

(8)No. There was no reason for the trial judge to depart from the ordinary rule that the successful party is entitled to costs.

Doug Kechnie is an insurance agent and investment advisor who sold Sun Life insurance and financial products to his clients for more than 30 years, through his company Kechnie Financial Group Inc. (“KFG”). Sun Life terminated its agreements with Mr. Kechnie and KFG (together, the “Kechnies”), as it was entitled to do, in October 2008. At the time, the Kechnies had accumulated a “book of business” that would entitle them to post-termination commissions of $22,435.19 per month for a period of 10 years in accordance with Sun Life’s Commissions on Release (“CORe”) program. Under that program, Sun Life’s advisors and agents were paid commissions following termination over a 10-year period, based on a percentage of the value of the estimated commissions that Sun Life anticipated would be payable on the products sold by them but remaining with Sun Life following termination. However, the CORe agreements provided that no further commissions would be payable if, after termination and during the 10-year period, the advisor “advises, counsels or induces a Client holding a Policy on which such Commissions are being paid, to: (a) terminate, surrender, cancel, or Replace the Policy; (b) allow the Policy to lapse; or (c) reduce the amount of the Premiums being paid under the Policy.”

Following the termination, Mr. Kechnie joined his son at another insurance and financial advisory agency. Mr. Kechnie “advised, counselled or induced” a significant number of his Sun Life clients to terminate or replace their Sun Life products and policies and to transfer them to his new business. Upon discovering this, Sun Life terminated the future stream of CORe payments. The Kechnies’ claim to recover the payments was dismissed at trial.

Issues:

(1) Did the trial judge err in failing to hold that the Kechnies’ rights to payment of the CORe commissions were “vested” proprietary rights at the time of termination?

(2) Is the resolution of the “vesting” issue a threshold question that must be resolved before the secondary question regarding the enforceability of the CORe termination provisions can be considered?

(1) No. The trial judge accurately captured the sense and purpose of the CORe program as being contingent upon compliance with the obligations imposed upon the Agents.

(2) No. A contractual term that provides for the forfeiture of the right to future payments in the event the holder of the right engages in certain conduct in the future may or may not be enforceable by the courts, whether the right has become vested or not. Accordingly, while a finding that the CORe program provided the Kechnies with a vested proprietary right to the future stream of payments may provide them with a stronger footing to resist forfeiture – because of a general reluctance by the courts to deprive people of a vested property right – such a finding is not necessary for a determination of the proceeding.

(3) No. Enforceability depends on whether the forfeiture clause has penal consequences and, if so, whether it would be unconscionable for the innocent party to receive the benefit of the forfeiture: 869163 Ontario Ltd. v. Torrey Springs II Associates Ltd. Partnership (2005), 76 O.R. (3d) 362 (C.A.). Default triggering the operation of a forfeiture clause attracts a relief-from-forfeiture analysis where there are concerns about “penal consequences” and about “unconscionability”. The jurisprudence recognizes – in the spirit of honouring parties’ rights to freedom of contract and their right to define their own consequences of breach – that penal clauses and forfeiture clauses may be enforced unless these two requirements underlying the granting of relief from forfeiture weigh against it.

The CORe payment termination clause is not a penal clause, nor is it a restraint on trade. However, it may properly be characterized as a “forfeiture clause”, because it involves “the loss, by reason of some specified conduct, of a right, property, or money”: Torrey Springs, at para. 22. Additionally it could, potentially, involve “penal consequences”, since the right forfeited by the defaulting party might in some circumstances bear no relation to the loss suffered by the innocent party. Equity does not relieve against all forfeiture consequences that may be negotiated by parties. It relieves against “penal” forfeitures. What flows from this is that the trial judge was required to determine whether the CORe payment termination clause had penal consequences – a determination that is made as of the time of default – and, if so, whether relief from forfeiture should be granted because it would be unconscionable to permit Sun Life to retain the benefits of the unpaid CORe amounts. That is precisely the analysis in which the trial judge engaged. The clause is enforceable. The trial judge’s decision is consistent with other authorities supporting the enforceability of forfeiture provisions in contracts of a similar nature to the CORe payment termination clause.

(4) No. The trial judge appropriately applied the test from Kozel v. Personal Insurance Co., 2014 ONCA 130, 119 O.R. (3d) 55, at para. 31. Moreover, the determination of whether to grant or refuse relief from forfeiture, as an equitable remedy, is a purely discretionary decision: the Courts of Justice Act, R.S.O. 1990, c. C.43, s. 98; Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., [1994] 2 S.C.R. 490, at para. 32. In the end, the trial judge determined that the CORe payment termination provisions were not punitive in nature or a penalty, nor were they contrary to public policy. Having so found, she correctly concluded that the principles of relief from forfeiture were not engaged.

Radmanish, the respondent, worked in a butcher shop with the appellant and the appellant’s two brothers. All three of them assaulted the respondent on three separate occasions. The parties admitted fault at trial but argued for the reduction of damages as they claim the assault was provoked. The trial judge found that the respondent was a credible witness, the defence of provocation could not be relied on in this case and that the appellant and his brother were liable as joint tortfeasors.

Issues:

(1) Were the trial judge’s assessments of credibility flawed?

(2) Did the trial judge err in his treatment of provocation?

(3) Did the trial judge err in finding that the appellant and his brother were joint tortfeasors?

Holding: Appeal Dismissed

Reasoning

(1) No. The trial judge’s appreciation of evidence attracts deference from a reviewing court. He did not need to address every inconsistency in the witnesses’ evidence. His factual findings were reasonably open to him on the evidence.

(2) No. This was a finding of fact, evidence was adduced about the possibility of provocation at trial, and the judge found that no provocation had occurred.

Facts: The Crate Marine group of companies operated a number of marinas, including Lagoon City Marina on Lake Simcoe (the “Marina”). The appellant, 2124945 Ontario Inc. (“212”) is the owner and landlord of the premises on which the Marina in located. Crate Marine’s sole operating entity was Crate Marine Sales Limited (“CMSL”), which operated the Marina. CMSL paid rent directly to the landlord 212; however, the tenants under the lease were Steven and Greg Crate as trustees “for a company to be incorporated”. The lease was never assigned to CMSL. In the fall of 2014, the Crate Marine companies became insolvent and A. Farber & Partners Inc. was appointed first as interim receiver and then as Receiver over the Crate Marine assets, undertakings and properties. The Receiver immediately took possession of the debtor company properties, continued Crate Marine’s boat storage operations at the Marina and collected accounts receivable from customers. 212 took the position that the Receiver owed occupation rent.

Issues:

Did the motion judge err in determining that the Receiver is not obligated to pay occupation rent for the period from December 8, 2014 to April 30, 2015, when the Marina lease expired and 212 began leasing the Marina to another tenant?

Was the result reached by the motion judge nonetheless correct because there was no privity between CMSL and 212?

Did the record support the finding that the presumption in favour of occupancy rent is rebutted in the circumstances or that equitable considerations, such as estoppel or detrimental reliance, lead to the same conclusion?

Holding: The motion judge erred in regards to issue 1, but not issues 2 and 3. The Receiver is liable to pay occupation rent.

Reasoning:

(1) Yes. The motion judge erred in his application of the test for determining whether the Receiver was liable to pay occupation rent. He erred by focusing primarily on “deprivation of use” and by conflating “deprivation of use” in the real property sense with “deprivation of use” in a more general strategic or economic benefit/detriment sense.

There is a longstanding principle that where a person occupies the property of another, that occupation gives rise to a rebuttable presumption, based on an implied contract, that the occupier will pay rent to the owner for the use of the property. Receivers, liquidators and trustees in bankruptcy and others with similar obligations who occupy the premises of the debtors are bound by that principle.

The threshold test for occupation rent is “occupation”. It is not deprivation of use or possession. However, deprivation of the right of use, or possession, to the exclusion of the landlord will no doubt be tantamount to occupation for these purposes. Where deprivation of use is tantamount to actual occupation, the liability to pay occupation rent is engaged.

“Right of use” in this context is a real property concept. A landlord’s right to receive occupation rent stems from the landlord’s real property interest in the lands. It is not tethered to whether that use gives rise to a net benefit or detriment to the landlord in an overall economic benefit or other sense.

Determining “occupation” is a factual exercise involving the consideration of general factors: (i) changing the locks; (ii) keeping assets of the estate on the premises; (iii) bringing prospective buyers to the premises; (iv) employing persons to perform maintenance work on the premises; and (v) employing persons to take inventory of the premises.

In this case, all the factors were present, with the possible exception of (iii). However, the motion judge downplayed them, and his treatment of their impact appears to have been subsumed into his overall view that 212 had not suffered any economic strategic disadvantage as a result of what had happened.

(2) No. CMSL operated from the Marina, actually paid the rent and booked Marina revenues and costs. Therefore, there is a sufficient nexus between CMSL and 212 in relation to the lease and to provide the necessary privity between 212 and the Receiver for the liability to pay occupation rent to flow from the Receiver to 212.

(3) No. The presumption that the Receiver was liable to pay occupation rent may be rebutted where there is evidence that the parties intended the occupier would use the land without an expectation of paying compensation to the owner. However, it is not tenable in this case to conclude that the parties intended the Receiver would use the land without compensation when 212 was adamant throughout that it was seeking occupation rent.

The appellant worked as an engineer in Iran before moving to Canada. He applied to the Association of Professional Engineers of Ontario (APEO) to be licensed as an engineer. There was a delay in licensing the appellant, who had to retake the licensing test several times. The appellant later brought an action against the APEO alleging negligence and bad faith in the processing and approval of his application. The appellant’s statement of claim was struck, but he was granted leave to amend the statement of claim. Following amendment of the claim, the APEO moved for summary judgment.

The motion judge held that there was no genuine issue requiring a trial and dismissed the action, holding that the APEO did not owe a prima facie duty of care to the appellant, or if it did, that duty of care would be negated by residual policy considerations. If a duty was owed, the motion judge held that the appellant could not demonstrate that the APEO acted in bad faith.

Issues:

(1) Did the motions judge error in ruling that the APEO had not acted in bad faith?

Holding: Appeal dismissed

Reasons:

(1) No. The court held that none of the acts the appellant complained of can be said to constitute bad faith. There was no evidence of malice or intent to harm on the part of the APEO, nor was there a fundamental breakdown in the orderly exercise of its authority or any abuse of power.

Keywords:Rules of Civil Procedure, Service, Rule 17.05, Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters

Facts: The plaintiffs are individuals residing in Canada and companies conducting business in Canada, along with two Panamanian companies. They seek $400 million in damages from the defendants, individuals residing in Guatemala or companies carrying on business in Guatemala, for conspiracy to commit tortious acts, breach of fiduciary duties, fraud, abuse of process, and unjust enrichment. Plaintiffs allege that damages were sustained in Ontario.

Issues:

(1) Can defendants in a state that is not party to the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the “Hague Convention”) be served in accordance with Ontario rules in an Ontario action?

Holding: Appeal dismissed

Reasoning:

(1) Yes. The intent of Rule 17.05 of the Rules of Civil Procedure is to afford the serving party a choice of how to serve parties outside Ontario. If the state is a signatory to the Hague Convention, service must comply with the requirements of the Convention. However, service on a non-Hague Convention state may be conducted in accordance with either the Ontario rules or the rules of the foreign state – the choice lies with the serving party.

An Ontario court must ultimately determine whether it has jurisdiction over the action, and whether it should stay the proceedings on the basis of the forum non conveniens doctrine. The Rules simply allow Ontario courts to be satisfied that foreign defendants have received notice of an Ontario action. In this case, service pursuant to Rule 17.05 does not impact Guatemalan sovereignty, and the respondents are entitled to have Rule 17.05 applied according to its terms.

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